New property tax reform

A recalculated property tax is to apply in Germany from 2025. For this purpose, owners* must file a property tax return between July 1 and October 31, 2022.

Almost 36 million properties in Germany will have to be revalued because of this change. Anyone who was the owner of a developed or undeveloped plot of land, a condominium or an agricultural or forestry business on the cut-off date of January 1, 2022, is required to submit a property tax return. Only when all property tax returns have been submitted and all data has been received by the tax offices does the calculation of the new property tax begin – the tax offices have until the end of 2023 to determine a new property tax assessment amount from the property tax value and tax assessment number. The new amount is passed on to the municipalities, which in turn calculate the new property tax until the end of 2024. The new tax will then only be effective from 2025. Property tax reassessment under the federal model is to occur every seven years.

What is actually the property tax ?

Property tax is a municipal tax levied on real property. A distinction is made between three types:

Real estate tax A: Agricultural and forestry real estate
Real estate tax B: Residential real estate, commercial real estate, real estate used for other purposes, private or public, and undeveloped real estate (unless real estate tax C applies).
Property tax C: certain undeveloped but ready-to-build properties

Property tax concerns us all. It is paid by the respective owners and can also be passed on to tenants due to a federal law.

Why is the property tax recalculated ?

The main reason for the recalculation is that up to now owners have always borne the same costs, despite different good locations or different costs for property of the same value – for some time now, house, apartment and land owners have felt that the property tax is unfair. Therefore, from now on, the location will be a significant calculation feature. This is especially true for booming communities and cities like Hamburg. Property tax is one of the most important sources of revenue for municipalities, as they use it to finance various public and infrastructural areas such as roads, swimming pools and daycare centers.

In the future, the value-based calculation model will therefore apply. The total amount of property tax is not expected to increase in the future as a result of the reform, it is just composed differently. Until now, only the size of the plot and the area of the building played a role, but not the location of the plot. With the value-based calculation model on which the new property tax is based, this is now set to change. This could result in higher costs for some owners in the future. In more structurally weak areas, on the other hand, it could become more favorable in the future.

Here, Hamburg relies on a model in which land value is not the determining factor. Housing should not become even more expensive than it already is. Unlike the federal model, the Hamburg model distinguishes only between good and normal residential locations. Standard land values and income in the form of net cold rent do not play a role. The differences, especially in the standard land values, are sometimes considerable. Depending on the district, the standard land value is between 380 euros and 4,200 euros or more per square meter. Increases and decreases in value are not included in the calculation of property tax.

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